Stocks have started the year strong as investors have positioned for easing inflation that could drive a shift in central-bank policy. The S&P 500 is up more than 4%, and investors are looking for signs about whether the rally can continue.
and
both reported sharply lower fourth-quarter profits, due to a substantial slowdown in deal making. Goldman’s shares fell 6% after it missed Wall Street’s estimates on earnings. Morgan Stanley stock rose 7%, after revenue and profit beat expectations.
A series of other major banks including
reported Friday. Collectively, they have put aside billions of dollars in loan-loss provisions in anticipation of a recession.
Fahad Kamal, chief investment officer at Kleinwort Hambros, said commentary from banks about deal making and the business outlook is important for investors because “these things tend to be at the very spear tip of leading indicators.”
Investors have grown more bullish on banks, believing higher interest rates will boost revenue through wider net-interest margins, said
Kiran Ganesh,
a multiasset strategist at UBS. “But with higher interest rates also comes the risk of higher loan losses,” he cautioned, saying that earnings offer a potential reality check.
U.S. indexes have gained to start 2023, with the S&P 500 up by more than 4% this year, as of Friday’s close.
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shares rose 20% after the crypto bank disclosed it lost nearly two-thirds of its asset value in the quarter.
Shares of
jumped 12% after the company, which operates a metaverse-like realm, or a virtual place where people play and make transactions, reported December metrics that showed a reacceleration in daily active users.
is among the other companies set to report results Tuesday, with its earnings due after the close.
The yield on the benchmark 10-year Treasury note was 3.534% versus 3.510% Friday, easing the recent rally in bonds. Yields rise when prices fall.
In riskier assets, bitcoin prices stabilized above the $20,000 mark for the first time since the collapse of the crypto exchange FTX. The cryptocurrency is still off about 70% from its all-time high in late 2021.
Chinese stock markets declined, as Beijing reported that annual economic growth slowed to 3% last year. Hong Kong’s Hang Seng Index fell 0.8%, and the Shanghai Composite Index inched down 0.1%.
“China will obviously have a lot of choppiness, in terms of coming out of Covid for the first quarter,” Mr. Kamal at Kleinwort Hambros said. “But what’s also critical is that clearly the state is really focusing on removing the Covid restrictions.”
In Japan, the Nikkei 225 rose 1.2%, as the
began its two-day monetary policy meeting. This meeting is being closely watched by investors in the wake of a surprise tweak to the central bank’s yield-curve control policy last month. The yield on the country’s 10-year government bond rose above the BOJ’s 0.5% cap again on Tuesday.
The pan-continental Stoxx Europe 600 rose 0.3%.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Hardika Singh at hardika.singh@wsj.com
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